The danger in buying a business in a poor economy – Or Not?

December 7, 2009

A number of people are asking “Aren’t there a lot of businesses on the market now?”  Their further comments suggest that many business owners are likely selling because they are not doing well.  This could make business buyers nervous.

It just is not so.  Entrepreneurs are smart.  They know that their business will sell for more if it is performing better than the current enconomy allows and that their investment will produce more for them if they can wait out the downturn.  Each seller I meet with is asked “can you wait?”

Of course, some can not wait for health or other personal reasons.  They must sell their business now.  Others have businesses that are not negatively affected, in fact some of these seemingly “recession-proof” businesses  are doing the best ever.  It could be exactly the right time for their owners to sell.  And, at any time, there can be lousy businesses on the market.  Some buyers recognize the gems in the latter, those with great opportunity, and know how to get a good deal now for a great future business.

Making the decision to sell is complex.  Obviously one thing to consider is how the business is doing, how mature it is to ensure securing the highest price for the seller.  Another consideration is whether the business is in good order, can show well to a prospective buyer.  Just as important to how the business will demonstrate viability for the prospective buyer is where the current owner is in their life.  What will they do if they do sell?  Are their willing and able to walk away and be content in some different activity.

Overall buyers are perhaps more cautious than in routine economic times.  But, at all times, buyers, to be successful, MUST do due diligence when looking at the opportunities.  Know what you are buying.  Don’t cut corners in evaluating a business.  Use consultants…attorney, CPA, brokers to assist in the evaluation.

There is always, bad economy or not, to be cautious.

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